Recently, thousands of financiers, founders, and investors descended on the Saudi capital of Riyadh for the kingdom’s Future Investment Initiative, the flagship economic conference at the heart of Vision 2030 — the multi-trillion-dollar plan to modernize and diversify Saudi Arabia’s economy.

Investors are making their forays into the kingdom, which is moving full steam ahead to remake its image and economy.

The kingdom has been in the spotlight, positioning itself as a global platform, but more so in the next few years when it will serve as center stage for some of the highest-profile global events—Expo 2030, the Asian Winter Games in 2029, the AFC Asian Cup 2027 and the 2034 FIFA World Cup (it’s the sole contender). 

Hosting those will become an extraordinary feat in itself. 

However, these events come at a cost. Countries must invest heavily in sports infrastructure, transportation, telecommunications, and hospitality. Cities like Tokyo invested about $30 billion to host the Olympics in 2020. Tokyo initially said it would spend $7.3 billion, but a government audit put the actual spending four times higher.

HUGE FINANCIAL COMMITMENT 

Saudi’s neighbor Qatar hosted the 2022 FIFA World Cup two years ago. Numerous media accounts have confirmed that the country spent $220 billion on the World Cup. In Doha, about $36 billion alone was spent on creating an extensive metro system, new airports, and new hotels to help accommodate the large crowds coming in from around the world.

Cities hosting major events must have a minimum of 40,000 available hotel rooms, which, in Saudi Arabia’s case, will require constructing about 10,000 new hotel rooms and associated services. Roads, metros, and airports also need to be upgraded or built.

Saudi Arabia has submitted plans to build 11 stadiums as part of its bid to host the 2034 World Cup. The proposed stadium in Neom, a city northwest of the country, will be accessible via high-speed lifts and driverless vehicles. The bid document claims the new Neom stadium will be “run entirely on renewable energy,” mainly from wind and solar sources.

Plans are underway to build a new international airport in Neom. The airports in all the other host cities are also set to be expanded. Saudi Arabia is also planning to extend train lines and bus routes.

Undeniably, hosting these events will be a massive financial commitment for Saudi Arabia. With so many projects going on—from Neom to the Red Sea to Qiddiya to airport and rail expansion—it won’t be easy to manage all these and the infrastructure for these events. 

Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington, says, “Challenging both from capacity in the construction industry and financially. Financially, a lot will depend on whether oil revenues over the next decade are high. If oil prices and production levels increase substantially from current levels, then much of the agenda can probably be met. If oil revenues are more subdued, it is hard to see how all the projects get financed.”

In recent decades, economists have debated these global spectacles’ overall positive economic impact and how they have been blemished by budget overruns, long-term debts, wasteful infrastructure, displacement, and environmental harm. 

GLOBAL ATTENTION AND LONG-TERM BENEFITS

However, experts argue that these events will have substantial long-term economic impacts apart from bringing prestige and global attention. They cite past global events that have seen tourism boom and job creation. Additionally, the injection of resources into the local economy will leave a profound impact now and in the future.

“These events will put Saudi Arabia even further into global focus,” says Callen. “People will travel to Saudi for the events, read about them, and see them in the media. They present Saudi Arabia with opportunities to further develop its image on the global stage.”

“The Saudis will have world-class sports and exhibitions in the kingdom and will see continued economic development as the infrastructure is built for these events. Also, jobs will be created,” adds Callen.

One of the claims regarding hosting mega global events is that inbound tourism would be a key feature during the event and post-event years. The boost largely comes from a surge in service activity.

For example, the Paris Olympics boosted the eurozone economy after a sharp rise in spending as millions of tourists flocked to the French capital for the summer sporting event.

Figures from business surveys showed that the monthly French private sector output rose to its highest level in 17 months in August.

Also, some of the new infrastructure built continues to be utilized. For example, the highways connecting cities and stadiums make travel quicker and more efficient.

If you get it right, it can be a boost.

“That is certainly the goal because major global events, like the World Cup, attract attention, boost the growing economy, improve the country’s image, and update core capabilities to extend the welcome mat,” says 

Joseph Kéchichian, a political scientist and a senior fellow at King Faisal Center for Research and Islamic Studies, Riyadh. “These are immensely important matters as the kingdom positions itself on the global checkerboard to become a key country within the developing world.”

Building a stadium (or anything else, really) will add value to the economy—people will be employed, and money will be spent. However, experts say it’s important to consider whether that benefit is greater than if that money had been spent on something else.

That is tougher to estimate, especially if you start talking about long-term benefits.

“The general view is that hosting major events generally does not pay off financially in terms of the event itself, but it can, in some cases, have longer-term economic benefits,” says Callen. “Barcelona for the Olympics was put on the global map by the event. The IMF has argued that Qatar benefits from the 2022 World Cup by seeing more visitors.”

“For a country like Saudi Arabia that is trying to diversify its economy and put itself on the global map, the World Cup is a tremendous opportunity to spur economic development,” adds Callen.

Qatar’s hosting of the grand sporting event spurred tourism, with retail and hospitality also benefiting. The overall attendance at World Cup matches was 3.4 million. Visa found that consumer spending (by value) was close to exceeding total spending for the entire FIFA World Cup 2018 (89%) and has already exceeded total spending at FIFA World Cup 2014 (192%).

Qatar was ranked fourth among the top 25 emerging markets globally in Kearney’s 2023 Foreign Direct Investment Confidence Index. The report said hosting the World Cup boosted investors’ interest in Qatar.

Expo 2020 Dubai is expected to contribute $42.2 billion of gross value added (GVA) to the UAE’s economy by 2042, according to a study by EY. The World Expo, which welcomed 24.1 million visits during its six-month run, supported more than one million full-time job-years, equivalent to over 35,000 jobs annually in the country.

PROS AND CONS

Major sporting events can benefit some parts of the economy; people will visit the country, bringing in revenue and creating jobs, and locals will participate in major global events. 

“The pros of such events are all too evident — economic windfalls, improved public relations gains, increased self-esteem at the popular level, and enhanced credibility on the world scale,” says Kéchichian, adding that the cons are also unmistakable. “Saudi Arabia will receive special attention to its human rights record, be held up to higher standards on socio-political matters, and otherwise come under the international media’s microscope even if the latter tends to be highly selective.”

According to Callen, the cons are very costly. “Saudi will need to build many new stadiums. Then there is the question about what happens to the stadiums after the World Cup. Does Saudi need this many soccer stadiums? There are broader questions about how the reforms in Saudi will be financed, and the Expo and the World Cup will add to these. Does Saudi have the construction and financial capacity to pull off all its planned projects?”

Yes, one can argue that all spending should be on productive, utilitarian-type measures. But the reality is that for Saudi Arabia, one of the richest countries in the world, it’s not only about profit and loss. The kingdom’s $925 billion sovereign wealth fund, the Public Investment Fund, saw its assets jump 29% to $765.2 billion in 2023 — and local investment was a significant driver. 

If a country can help create enjoyment and raise its international profile through sports or a World Expo, one cannot say it shouldn’t be done just because the economic benefits are not great.

“High capital infrastructure causes short-term budget deficits in every economy, but Saudi Arabia will, over the long term, recoup its investments in such construction projects. One has to spend money to make money,” says Kéchichian.

Also, isn’t there more to life than economics? Well, at least, for Saudi Arabia, it is. It looks at these events using a different calculus. 

The kingdom is relying on heavy investments in building mega projects, railway lines, highways, and other infrastructure to provide millions of jobs to its citizens. It is also nurturing an interest in sports that could increase consumer spending, attract FDI, and boost tourism while keeping its diversification plans on track.

“Saudi Arabia is becoming a fully integrated part of the world, joining the international community in hosting significant events, welcoming everyone to the kingdom, and reaping the benefits of its open-door policies,” adds Kéchichian.